This report describe an experimental two-layer optical neural network built at Caltech. The system uses photorefractive volume holograms to implement dense, modifiable synaptic interconnections and liquid crystal light valves (LCVS) to perform nonlinear thresholding operations. Kanerva's Sparse, Distributed Memory was implemented using this network and its ability to recognize handwritten character-alphabet (A-Z) has been demonstrated experimentally. According to Kanerva's model, the first layer has fixed, random weights of interconnections and the second layer is trained by sum-of-outer-products rule. After training, the recognition rates of the network on the training set (104 patterns ) and test set (520 patterns) are 100% and 50%, respectively.